Forex: CBN creates FX window for investors, exporters

Two weeks after opening a special Forex window for Small and Medium Enterprises (SMEs) to enable SMEs import eligible finished and semi-finished items, the Central Bank of Nigeria (CBN) on Friday, April 21, 2017, established a Forex widow for investors and exporters tagged: “Investors’ & Exporters’ FX Window”.

A circular issued by the CBN on Friday disclosed that the purpose of the window was to boost liquidity in the forex market and ensure timely execution and settlement for eligible transactions.
The circular signed by the Bank’s Director in charge of Financial Markets, Dr. Alvan Ikoku, listed eligible transactions under the new window to include invisible transactions such as loan repayments, loan interest payments, Dividends/Income Remittances, Capital Repatriation, Management Service Fees and Consultancy fees.
Also on the eligible list are Software subscription fees, Technology Transfer Agreements, Personal Home Remittances and any such other eligible transactions including ‘miscellaneous Payments’ as detailed under Memorandum 15 of the CBN Foreign Exchange Manual.
While explaining that the invisible transactions under this window excludes international airlines ticket sales’ remittances, the circular added that the window covered Bills for Collection and any other trade-related payment obligations, which are at the instance of the customer.
The circular further clarified that the permitted invisible transactions and Bills for Collection were eligible to purchase foreign currency sourced from the CBN Forex window limited to Secondary Market Intervention Sales (SMIS) Wholesale (Spot and Forwards) only.
According to the statement, international airlines ticket sales’ remittances shall only be eligible to access the CBN FX window (SMIS-Retail and Wholesale; spot and forwards.
On participants in the new window, the circular disclosed that supply of foreign currency to the window shall be through portfolio investors, exporters, authorized dealers and other parties with foreign currency to exchange to Naira. The CBN, it added, shall also be a market participant at the window to promote liquidity and professional market conduct.
Taking cognizance of the slow progress made by corporates in on-boarding the FMDQ OTC Securities Exchange (FMDQ) Thomson Reuters FX Trading & Auction Systems, the CBN said participants at the new window would trade via telephone until appreciable progress is made with the FX trading systems on-boarding process.
The circular, therefore, advised authorized dealers to promote market transparency by encouraging their corporate clients to on-board to ensure the activities of the window are operated on the forex trading systems.
To provide price discovery to the market, it said the FMDQ will be charged with polling buying and selling rates and other relevant information from the major participants in the market to provide participants with the requisite price discovery, and the CBN with the indicative market depth until the market migrates to the FX Trading systems.
As part of the operational requirements of the window, the CBN circular said the exchange rates of the transactions in the window shall be as agreed between authorized dealers and their counterparties. It also said that the CBN reserved the right to intervene as a buyer or seller, as it deems fit, in the window, adding that information on transactions between authorized dealers shall be reported to the CBN on a daily basis.